Theory of Customs Unions

Ali M. El-Agraa
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Ali M. El-Agraa: Leeds University

Chapter 2 in The Theory and Measurement of International Economic Integration, 1989, pp 19-47 from Palgrave Macmillan

Abstract: Abstract Before the theory of second-best was developed (Meade, 1955a; Lipsey and Lancaster, 1956–7), it used to be the accepted tradition that customs union (CU) formation should be encouraged. The rationale for this was that since free trade maximised world welfare and since CU formation was a move towards free trade, CUs increased welfare even though they did not maximise it. This rationale certainly lies behind GATT article XXIV (see Appendix to Chapter 1) which permits the formation of CUs and free trade areas (FTAs) as the special exceptions to the principle of non-discrimination, provided the intra-area dismantling of tariffs applies to a substantial part of the partners’ trade.

Keywords: Free Trade; Supply Curve; Custom Union; Tariff Rate; Trade Diversion (search for similar items in EconPapers)
Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-10203-7_2

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DOI: 10.1007/978-1-349-10203-7_2

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